N15trn revenue: Why FG couldn’t fund N9trn 2018 budget
•NNPC collected N4.69trn, remitted N1.341trn
•Senate accuses NPA of not remitting N177bn
•Budget based on wrong premise –Analyst
As speculations trail the alleged N15trillion revenue earned by the Federal Government in 2018, it has been disclosed that it was actually a shortfall in expected revenue accruable to government in the 2018 fiscal year that was responsible for its inability to fund its N9.12 trillion budget in the review year.
It will be recalled that a recent post that went viral in the social media indicated that despite fact that the Federal Government earned about N15 trillion in 2018, it could still not fund the 2018 budget.
A breakdown of the assumed earning of the Federal Government in 2018 was: FIRS-N5.3 trillion, NNPC N7 trillion, Customs-N1.2 trillion and other revenue generating agencies – N500billion.
But President Muhammadu Buhari on the occasion of the his presentation of his 2019 Appropriation Bill to the National Assembly on Wednesday, December 18, 2018, disclosed that the Federal Government’s revenue performance for the fiscal year was about 52 per cent of the projected revenue in the 2018 budget .
He stated the federally collected revenue fell short of the projected amount, with only 53 per cent of the target achieved as at the end of the third quarter of 2018.
According to him, while crude oil price was favourable at an average of $72.76pb as at the end of the third quarter (47 per cent higher than the budget benchmark of $51pb), a shortfall in production from the target, due to closure of some key pipelines in the second quarter of the year led to the drop in crude production from 2.00bpd in Q1:2018 to 1.84bpd in Q2:2018, before a slight pick-up in Q3:2018 to 1.94MMbpd.
“Hence, federally collected revenue stood at N2.84trillion as at Q3:2018, 53.00 per cent of the sum projected in the budget. The share of oil revenue stood at N1.5trillion, 53.17 per cent of the total revenue, while Company Income Tax, Value added Tax, and Customs Collection make up 17.62 per cent, 3.53 per cent, and 8.09 per cent respectively,” he said.
President Buhari said that based on these assumptions, the Federal Government’s aggregate revenue of N7.17 trillion was projected to contribute to the 2019 budget while the projected deficit of N1.95 trillion (or 1.73 per cent of GDP) was to be financed mainly by borrowing.
“As at the end of the third quarter, the Federal Government’s actual aggregate revenue was N2.84 trillion, which is 40 per cent higher than 2017 revenue.
“The overall revenue performance is only 53 per cent of the target in the 2018 budget largely because some one-off items are yet to be actualized. We have now rolled this revenue item over to 2019,” he said
According to the President, Nigeria’s 2018 budget had recorded about 67 per cent implementation by Ministries, Departments and Agencies (MDAs) of government.
He further explained that out of the total appropriation of N9.12 trillion, N4.59 trillion had been spent by September 30, 2018, against the prorated expenditure target of N6.84 trillion.
According to Dr Deji Omotoyibo, an economist and fellow of the Nigerian Institute of Social Science Research, even if the figures thrown up in the social media as the income of the Federal Government in the 2018 fiscal year is anything to by, “that basket of funds belongs to the Federal Republic of Nigeria (the three tires of government), it is the Federal Government’s money.
“The share of the Federal Government is 55 per cent of the entire revenue while the states have 26 per cent of it and the local governments 20.5 per cent. That is when you have removed the 13 per cent derivation from oil receipts and other deductions, including the Ecological Fund.
“Mind you, when it comes to the NNPC’s income, recall that what will actually get to the Federal Republic of Nigeria is what NNPC remits to the Federation Account (Consolidated Revenue Account).
“The opaque nature of NNPC’s account has remained unchanged even with this administration’s sloganeering of transparency and implementation of TSA. So it will be wrong to estimate the revenues that will be available to the Federal Government or the three tiers of government from the earnings of NNPC.”
Omotoyibo noted that NNPC takes care of Joint Venture Cash (JVC) call payments from its income, was paying oil subsidy (ingeniously called ‘Under Recovery Payment’) and other payments.
“It is the balance that it pays to the Consolidated Revenue Account for the three tires of government to share and it is the 55 per cent of the revenue that goes to the Federal Government that can be called its revenue,” he said.
Meanwhile, figures our correspondent saw on the NNPC website on Wednesday indicate that while the organisation earned about N4.69 trillion between September 2017 and September 2018, it remitted only N1.341 trillion to the Consolidated Revenue Account in the review period.
The Federal Inland Revenue Authority (FIRS), which generated N5.3 trillion in 2018, Nigeria Customs Service, which collected N1.2 trillion, pay their revenue directly to the Federation Account, though their 7 per cent cost of collection is deducted for the running of the two main revenue collecting agencies.
The final figures (though a few billions of naira) of what the Nigerian Maritime Administration and Safety Agency (NIMASA) and Nigerian Ports Authority (NPA); was not available at press time.
Sunday Telegraph learnt that like NNPC, NPA and NIMASA spend part of their revenue and remit the balance to the Federation Account, but the NPA was accused in November last year by the Senate of not remitting N177 billion to the Federation Account, which was the balance of the N303 billion it earned in 2017.
To this end, the Senate in November 2018 directed its committee on Marine Transport to determine if the alleged N177 billion unremitted fund was in the custody of the NPA.
A member of the committee, Mohammed Hassan, had called the attention of his colleagues to the issue while raising a point of order. Mr. Hassan said the agency in 2017 made gross revenue of N303 billion, out of which N125 billion was spent but the remaining N177 billion was not remitted to the federal government.
Speaking, the Director-General, Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, commended the performance of the budget, but noted that it was based on wrong revenue premise of benchmark oil price of $51 and oil production of 2.3mpd and an exchange rate of N305 to the dollar.
He said that realities on the ground showed that Nigeria was not able to produce as much as 2.3 million barrels of oil per day eventhough the price rose to $87 a barrel.
“In 2018, average oil production up to end of the third quarter was 1.95 mbpd, as against the estimated 2.3 mbpd for the entire year. However, average market price of Bonny Light crude oil was higher (an average of $74 per barrel as at October) than the benchmark price of $51.”
He expressed optimism that the economy would pick up after a successful and peaceful completion of the 2019 election and urged the government to be more realistic in its exchange rate.
Also speaking on the budget performance, the Chief Executive Officer of Financial Derivates Limited, Mr. Bismark Rewane, said the inability of the budget to meet is projections is attributable to shortfall in revenue.
He stated that the Federal Government must sustain its economic diversification policy in order to diversify its revenue sources away from crude oil.
For the Chief Executive, Global Analytics Limited, Tope Fasua, making reference to the 2018 budget as “Budget of Consolidation,” was not correct, rather it should be called “Budget of Mediocrity”, when compared to the budget of some African countries.
“Nigeria’s economy is supposed to be the biggest in Africa. But, we are the lowest, both in per capita budget figures and in absolute terms. Nigeria is in the middle among South Africa, Algeria, Egypt and Angola.
“In 2018, South Africa budgeted about $116 billion, against Nigeria’s $23 billion, despite being Nigeria’s highest appropriation ever. Angola did $124billion; Algeria $53 billion and Egypt $40 billion.
“What it shows is that successive Nigerian governments have not been dreaming. Not enough revenue is being generated, yet we are one of the most profligate countries in the world. We should be budgeting about N30 trillion,” Fasua said.